(Bloomberg) -- Ireland holds a general election on Friday, with Prime Minister Simon Harris hoping to capitalize on a strong economy to secure another five years in power.
Harris brought the vote forward from a March deadline after opinion polls showed a bump in support for the main parties in his centrist coalition. The opposition will be trying to engineer an upset by tapping into voter anger over sky-high housing costs.
What’s the economic backdrop?
The small European Union nation has come a long way since the Global Financial Crisis, which led to the collapse of its banking system and forced the government to seek a bailout from the bloc.
Ireland expects to reap a record €38 billion ($40.2 billion) in corporate tax receipts this year, much of it from the cluster of multinational companies, including Apple Inc. and Pfizer Inc., that have based their European operations in the country to benefit from its low taxes. The figure was boosted by a one-off back-tax payment of almost €14 billion from Apple following a European court ruling.
The coalition government, comprising Fine Gael, Fianna Fail and their junior partner the Greens, used the resulting budget surplus to deliver a fiscal bonanza in the October budget that included tax credits and extra child benefit payments.
What’s at stake in the Irish election?
The centrist Fine Gael and Fianna Fail have taken turns governing Ireland over the years, and they symbolize stability and continuity for both voters and investors. The coalition recently established a sovereign wealth fund to protect the country against future economic shocks, and has pledged to keep filling its coffers.
Harris has promised if reelected to create a Department of Infrastructure to ease gridlock in major projects, including a power network overhaul that’s an urgent priority for some of the big companies based in the country.
The main opposition party, Sinn Fein, wants a more sweeping program to upgrade aging national infrastructure, and also proposes to reform the housing market, saying the government’s approach to these issues has left working-class people behind. It’s pledged to create a €1 billion investment fund for deprived communities out of the Apple tax windfall. The party also wants to impose higher taxes on wealthy individuals.
Polls suggest it’s unlikely Sinn Fein will be able to form a government. If it did, it would be a historic development. The party is best known beyond Ireland as the political wing of the Irish Republican Army and the champion of Irish reunification. While the other main parties aspire to reunite the Republic with British-ruled Northern Ireland, it is not their immediate priority.
What’s the situation with housing?
There’s widespread discontent over the surge in housing costs caused in part by a slowdown in construction since the 2008 crash. Sinn Fein has pledged to fix the problem with a set of measures intended to cut selling prices and improve the situation for tenants in rental properties. The proposals are popular with many of the younger voters most affected by the crisis, but have drawn skepticism from parts of the real estate sector.
The plan, which has evolved over several years, helped to give the party a big boost in the polls. It appeared as recently as nine months ago to be on track to form a government for the first time since Ireland gained independence in 1922.
However, support for Sinn Fein has plunged since then as immigration emerged as a major concerns for voters. Anti-immigration activists have accused migrants of exacerbating the housing crisis and putting a strain on the health system and other public services. Sinn Fein supporters favor the toughest controls on immigration, according to an Irish Times poll. That’s tricky for a party that, because of its left-wing roots, has typically taken a liberal stance on immigration.
Part of Sinn Fein’s working-class base drifted away to other parties and independent far-right candidates in local and European elections in June.
Who are the main players?
- Fine Gael: Polls have favored the centrist party in recent months. Harris has seen his personal approval ratings soar after he promised a new approach to immigration. Colleagues say he has brought fresh energy to the party.
- Fianna Fail: Ireland’s other main party of the center is led by political veteran Micheal Martin, the deputy prime minister. It also holds the finance portfolio and oversaw October’s giveaway budget.
- Sinn Fein: The party argues that real change will only happen when Fine Gael and Fianna Fail, which are increasingly indistinguishable, are ousted. Crucial to the party’s steady rise is its leader Mary Lou McDonald, who has sought to broaden Sinn Fein’s policy platform beyond its traditional focus on Irish reunification and distance the party from its connection to Northern Ireland’s “Troubles.” It has recently faced criticism for perceived autocratic internal party structures that are seen as a relic of the past.
- Smaller parties: These players, a mixture of the left and the right, often help to prop up Irish governments. The rise in support for independent right-wing candidates could challenge their status as kingmakers.
What is the most likely outcome?
Coalitions are common in Ireland, and polls suggest Fine Gael and Fianna Fail will have the numbers to clinch a fresh five-year term as partners. That’s despite Fine Gael’s projected vote share falling by six points to 19% in the last two weeks, according to the latest Irish Times/Ipsos B&A poll. The three main parties are now all within two percentage points of one another —- all within the margin of error of 2.8%.
What’s less certain is who might join a pact if the two main parties need extra support. Some right-wing, independent players running on anti-immigration tickets could lend a hand, but center-left groups such as the Social Democrats, Greens or Labour Party may be more appealing to Fine Gael and Fianna Fail. Both have ruled out governing with Sinn Fein.
While Sinn Fein’s polling suggests it will fall short of the numbers to form its own coalition, its emergence as a formidable political force has reshaped Irish political dynamics by creating a credible challenger to the two big establishment parties.
What’s the election process?
Ireland uses proportional representation to elect its lawmakers, and the process to form a government can take time. Once polling stations close at 10 p.m. on Nov. 29, counting is likely to take at least a few days. So it may not be clear who will form the next government until the following week at the earliest.
If Fine Gael and Fianna Fail perform particularly well, the process could be shorter as it won’t take them long to form a coalition — assuming they want to govern together again. Negotiations are likely to begin unofficially before the new parliament, known as the Dail, is scheduled to convene on Dec. 18. So a new government could officially be inaugurated shortly after that date.
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